Cheat Sheet

Personal Finance For Seniors For Dummies

You work hard for your money. In order to enjoy an enjoyable and stress-free retirement, you need to make the most of your finances and retirement planning. You can get on the right track by determining the appropriate age to retire, becoming familiar with Medicare, and understanding your pension and how it’s protected.

The Age You Can Retire and the Benefits You Receive

As you know, your age has a lot to do with when you can retire. If you retire at or later than your full retirement age for Social Security benefits, you’ll make the most of your benefits. Planning to maximize your benefits helps you to enjoy your golden years.

The following table summarizes the age at which you may retire and begin full Social Security benefits. It also shows the reduction in those benefits (including for your spouse) if you desire partial benefits at age 62. This information is useful when you’re crunching numbers and trying to determine by what age you may be able to retire.

Year of Birth

Full Retirement Age (FRA)

Months between Age 62 and FRA

The Retirement Benefit Is Reduced By

The Spouse’s Benefit Is Reduced By

1937 or earlier

65

36

20.00%

25.00%

1938

65 and 2 months

38

20.83%

25.83%

1939

65 and 4 months

40

21.67%

26.67%

1940

65 and 6 months

42

22.50%

27.50%

1941

65 and 8 months

44

23.33%

28.33%

1942

65 and 10 months

46

24.17%

29.17%

1943–1954

66

48

25.00%

30.00%

1955

66 and 2 months

50

25.83%

30.83%

1956

66 and 4 months

52

26.67%

31.67%

1957

66 and 6 months

54

27.50%

32.50%

1958

66 and 8 months

56

28.33%

33.33%

1959

66 and 10 months

58

29.17%

34.17%

1960 and later

67

60

30.00%

35.00%

If you were born on January 1, you’ll be treated as if you were born the previous year. If you were born on the first of the month, the benefit is figured as if your birthday was in the previous month. You must be at least 62 for the entire month to receive benefits. The percentages in the preceding table are approximate due to rounding. The maximum benefit for the spouse is 50 percent of the benefit the worker would receive at full retirement age. The percent reduction for the spouse should be applied after the automatic 50 percent reduction.

Medicare: Your Link to Health Care during Retirement

Medicare is the primary program used to finance health care for retired Americans age 65 and older. It covers hospitalization and some basic medical services during your golden years. The good news: Almost anyone can join Medicare at age 65.

Upon joining, each beneficiary pays a monthly premium along with deductibles and copayments. Medicare pays the rest of the covered health care services. Many medical services aren’t covered, however.

The biggest gap in coverage for retirees is for long-term care. Medicare generally only pays for brief stays at long-term care facilities that are for rehabilitation or recovery after an illness, surgery, or injury. It pays only about 15 percent of nursing home expenses nationwide and even lower percentages of the cost of assisted living and home health care.

As a prospective retiree, you should plan ahead for the possibility of needing nursing home care, assisted living, or home health care. Personal Finance For Seniors For Dummies can help you with that planning.

The four parts of Medicare are

Part A: This part provides hospital coverage.

Part B: This part covers outpatient medical services, such as visits to doctors.

Part C: This part is offered by private insurers as an alternative to Original Medicare and usually provides broader coverage.

Part D: This part provides prescription drug coverage.

What Is My Pension Protection?

As you enter retirement, you may be fortunate enough to have a pension from your employer. If you have vested pension benefits (that is, benefits you have already earned based on your years of employment service), you may worry about losing those benefits if the company were too fail while you were sailing through your golden years.

Rest assured that employer pensions are backed by the Pension Benefit Guaranty Corporation (PBGC), an independent government agency. The following table shows the 2010 annual and monthly maximum PBGC benefit guarantees you would receive if your former employer were to close up shop.